4G auction: Ofcom may yet end up in court

Mobile phone users will be able to use 4G networks from late 2013Photo: CORBIS

12:04PM BST 24 Jul 2012

From Korea to America and from Japan to Germany, the latest mobile phones are everywhere. Except the UK. And these new devices, running on ‘4G’ networks, will not be offering their superfast internet access in Britain until next year at the earliest.

That’s thanks, in part, to the ferociously complicated telecoms market that has evolved in Britain – with four big operators, oddly distributed spectrum and the constant threat of legal action if licences for 4G are not fairly distributed, communications regulator Ofcom had its work cut out.

Originally, the auction process was to be concluded by the end of this year, and operators dropped heavy, optimistic hints that their services would even be offered for sale in time for Christmas. But threats of legal action from all sides meant Ofcom ended up launching two consultations on how to run the auction, and then finally conceded that the process would not conclude until 2013.

While it’s unfashionable to support the regulator, it seems likely that any other outcome would have ended up with the operators in court anyway and delayed the process even further. While that outcome is still not impossible, it is now less likely.

Even so, delays to 4G services will be bad for British businesses, eager to compete globally, and bad for consumers. Thomas Wehmeier, an analyst at Informa, said “the arrival of 4G in UK in 2013 puts the nation light years behind global 4G leaders. The UK is already seen as Europe’s most complex and fragmented telecoms market and it now looks set to add another unwanted title to its repertoire as a European 4G laggard.”

Now, finally, chief executive Ed Richards has announced how the auction process will be run – and unlike the previous auction for 3G spectrum, this one is very unlikely to bring in £22.5billion. But it is no less complex: Ofcom released more than 1,000 pages of documentation detailing how it wants the process to operate.

In short, four network operators will emerge, with means O2, Everything Everywhere, the owners of T-Mobile and Orange, plus Vodafone and probably Three will all be able to offer the familiar mobile services, but speeds will dramatically increase.

There is also the outside chance that Three will be outbid by a new entrant, such as BT or TalkTalk, seeking to supplement their existing broadband networks. Even so the Treasury is unlikely to net more than a few billion from the networks, who are still smarting about overpaying for 3G.

And what will this mean for consumers? One of the four licences will mandate 98 per cent indoor coverage, bolstering the expected 99 per cent population coverage. This will prove a boon to rural dwellers whose fixed line broadband is slow and who are unlikely to ever benefit from BT installing faster connections. New 4G mobile services will get up to a likely 20Mbps, which is far faster than the frequent 1.5Mbps that many currently struggle with. It will make entertainment services straightforward and it will also unleash the possibility of, for instance, a new generation of in-home monitoring services that could allow the elderly to live in their own homes for longer thanks to a direct link to doctors as well as to carers, friends and families.

In that context, at least, a globally mature 4G market will have emerged by the time of UK deployment, and so consumers may benefit from the availability of better products and increasing economies of scale. This should make Ofcom’s ambitions to keep consumer prices down more viable.

Dominic Baliszewski, telecoms expert at Broadbandchoices.co.uk, said “4G will provide a digital lifeline to rural communities who are currently languishing on broadband connections that are not fit for purpose, but there is still a long wait ahead. It’s a shame that this is yet another delay for a service which has been available in the US since last year.”

He added, too, that mobile broadband is no substitute for improved fibre connections. Plus, in the delay to the 4G auctions, even more WiFi hotspots will emerge in cities and the countryside will be left further behind.

Nonetheless, Richards is right to claim that “As a direct result of the measures Ofcom is introducing, consumers will be able to surf the web, stream videos and download email attachments on their mobile device from almost every home in the UK.” The regulator has focused on substantial rural and indoor coverage. Consumers should benefit from that – it’s just a shame there’s so long to wait.

The auction will add up to 250 MHz of additional mobile spectrum, compared to 333 MHz in use today, and one of the 800 MHz lots of spectrum will carry an obligation to provide indoor reception to at least 98 per cent of the UK population by the end of 2017 at the latest.

The industry, however, has yet to digest the rules for the auction, and the devil will certainly be in the detail. Consumer Panel Chair Bob Warner said “We now call on Ofcom and the operators to deliver this without further delay.”

Warner is surely right to raise that note of caution. A Vodafone UK spokesperson said ominously “we will obviously need to study today’s lengthy documents to make sure they deliver the fair and open auction that this country needs." If just one network decides it is being disadvantaged, then this whole process will indeed end up in court – too much money is at stake for the global business charged with delivering digital Britain.